US TSYS: Cash Open

TYU5 is trading 110-18, up 0-03 from its close. 

• The US 2-year yield opens around 3.9325%, unchanged from its close.
• The US 10-year yield opens around 4.444%, unchanged from its close.
• US: MNI INTERVIEW: Uncertainty over trade policy will drag on U.S. manufacturing until at least the fourth quarter, as demand remains weak and the preemptive build-up of inventories begins to deplete, Institute of Supply Management survey chief Susan Spence told MNI on Monday.
• FED: MNI INTERVIEW: Federal Reserve officials will face a difficult choice on interest rates later this year as a significant reprieve on tariffs remains unlikely, so inflation will rise at the same time as economic growth falters, former White House economist Douglas Holtz-Eakin told MNI.
• The 10-year has bounced nicely off its support around 4.35/40%. Yields need to hold above this area to continue to build for a move higher. 
• Data/Events: Factory Orders, Durable Goods Orders, JOLTS

The ESM5 Overnight range was 5867.50 - 5955.50, Asia is currently trading around 5935. US stocks continue to find demand for now on dips, the S&P looks to be building for another test of 6000.

• (Reuters) - “The Trump administration wants countries to provide their best offer on trade negotiations by Wednesday as officials seek to accelerate talks with multiple partners ahead of a self-imposed deadline in just five weeks, according to a draft letter to negotiating partners viewed by Reuters”
• A succinct view by Boring Business on X: “The future increasingly feels like a battle between inflationary pressures from government money printing + debt monetization and deflationary pressures from AI + technology.” https://x.com/BoringBiz_/status/1929306350296645650
• (Bloomberg) - “Bank stocks are a proxy for the health of their domestic economy. If post-Liberation Day price action is a guide, traders are betting the US will come out the loser of the ongoing trade turmoil. While US banks are still trading at a higher average price-to-book ratio than those in the UK, Germany, France or Japan, they have cheapened the most of a global cohort since March.”
• Stocks could not get back above the 6000 area last week, the move looks overdone but momentum type funds and share buybacks have kept the market well supported. Share buybacks are set to enter their blackout period in the middle of June, will this be the catalyst to see some sort of a retracement in stocks ?
• The price action continues to point to a market that has been caught begrudgingly underweight, and as a result the dips continue to be supported.

• In the short-term stocks are beginning to look overbought and a retracement would be healthy. The first buy-zone is back towards the 5600/5700 area where demand could be expected.

  Fig 1: SPX Daily Chart

  

  Source: MNI - Market News/Bloomberg

While the Q1 merchandise terms of trade rose less than expected at 1.9% q/q, it was the fifth straight monthly increase after it was up 3.2% in Q4. Statistics NZ notes that the softer kiwi “contributed” to higher export and import prices. Export volumes rose solidly for the second straight quarter boosted by dairy products and should be a positive in Q1 GDP when it is released on June 19.

NZ terms of trade y/y%

• Export prices rose 7.1% q/q to be up 17.2% y/y boosted by a 10.5% q/q increase in dairy prices and 7.2% q/q in meat, while import prices were up 5.1% q/q & 6.2% y/y. Consumer goods import prices rose 3.5% q/q to be up 5.5% y/y after 1.7% y/y in Q4. This is the highest annual rate since Q2 2023 and likely added to CPI inflation.
• The services terms of trade rose 4.2% q/q but was still down 7.3% y/y after -7.4% y/y in Q4. Services export prices rose 3.2% q/q & 3.8% y/y, while imports fell 0.8% q/q but were still up 12.1% y/y. 
• Merchandise export volumes rose 4.7% q/q in Q1 driven by a 7% q/q jump in dairy products.
• Goods import volumes fell 2.5% q/q to be up 2.0% y/y down from Q4’s 5.8% y/y reflecting continued weak domestic demand. Consumer goods imports rose a moderate 0.2% q/q but annual growth eased to 2.5% from 5.9%.

NZ import prices vs CPI y/y%